Amid a conservative-led boycott, sales of Bud Light have dropped and beer drinkers have sought out alternative light-beer options from rival Molson Coors Beverage Co. However, Wells Fargo analysts suggest that investors have not fully considered what will happen if Molson’s sales boom subsides.
Impact on Market
Since the boycott began over two months ago, Anheuser-Busch InBev BUD, -1.33%, the parent company of Bud Light, has suffered a decline in its shares following complaints that the brand had “gone woke” after partnering with trans influencer Dylan Mulvaney. Molson Coors TAP, -0.44%, on the other hand, has seen a rally in shares as Bud Light lost sales to other brands.
What Lies Ahead?
The Wells Fargo analysts noted that Molson Coors’ stocks appear to be “fairly” or “fully” valued but are not priced for a significant decline. Currently, there is little indication that Molson will give back the beer sales it has acquired due to the boycott of Bud Light. However, the analysts warned that the beer industry is still facing challenges. Sales volumes have been weak, and with competition from other beverages, businesses are left with a substantial amount of unsold brew.
Holiday Season Approaching
As the July 4th and Labor Day holidays approach, bigger discounts and heavier competition in the beer aisle are likely possibilities. Regardless of what the future holds for Molson Coors and Anheuser-Busch InBev, it seems evident that the beer industry as a whole will continue to face challenges in the coming months.
Bud Light Fight Shows No Signs of Easing
Despite a recent boycott of AB InBev’s Bud Light, its main rival Molson Coors continues to face significant challenges. In light of this, analysts from Wells Fargo have raised their price target for Molson Coors to $64 from $60, however they still recommend selling the stock. They commented that, “the stock now seems to be reflecting estimates far higher than Street consensus.” The same analysts also suggested that it was unlikely Bud Light would cede all its market share without a fight, but didn’t recommend reversing the boycott.
Accordingly, Molson Coors shares remained largely unchanged on Friday, down only 0.09%, while AB InBev saw its shares fall by 1%. The boycott was initiated during the Super Bowl, and by some estimates, it has already resulted in Bud Light losing its position as the most consumed U.S beer brand, with Modelo Especial now taking the number one spot, according to Bump Williams Consulting. Meanwhile, Deutsche Bank analysts upgraded AB InBev from hold to buy despite the boycott, commenting that; “these headwinds are likely to fade even if we do not expect the U.S business ever to fully recover from its current challenges.”